We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
CSP Q1 Earnings & Revenues Fall Y/Y, Margins Rise on Service Growth
Read MoreHide Full Article
Shares of CSP Inc. (CSPI - Free Report) have declined 1.8% since reporting results for the first quarter of fiscal 2026. This compares with the S&P 500 index’s 1.5% slip over the same time frame. Over the past month, the stock has lost 15% compared with the S&P 500’s 1.9% fall.
CSP reported revenues of $12 million for the fiscal first quarter ended Dec. 31, 2025, down from $15.7 million in the year-ago period. The decline was primarily caused by the absence of several large, one-time product transactions that contributed more than $4.5 million in the prior-year quarter. Product revenues fell to $6.7 million from $11 million, while services revenues rose 14.6% year over year to $5.3 million from $4.7 million.
Despite lower total revenues, gross profit increased to $4.7 million from $4.6 million, and the gross margin expanded sharply to 39.3% from 29.1%, reflecting a richer mix of higher margin services revenues. Net income declined to $91,000, or 1 cent per diluted share, from $472,000, or 5 cents per diluted share, a year earlier.
The operating loss narrowed to $112,000 from $354,000 in the prior-year quarter, reflecting improved gross profitability and relatively stable operating expenses. Engineering and development expenses increased to $858,000 from $786,000 as CSP continued to invest in customization and OEM-embedded initiatives for its AZT PROTECT cybersecurity solution. Selling, general and administrative expenses declined modestly to $4 million from $4.1 million.
On the balance sheet, CSP ended the fiscal first quarter with $24.9 million in cash and cash equivalents compared with $27.4 million at Sept. 30, 2025. Management indicated that the decrease was largely related to financing deals closed in the quarter, with $3.3 million in financing payments expected over the next two quarters. Current liabilities declined to $17.9 million from $22.2 million at the end of the fiscal year, while shareholders’ equity increased slightly to $44.8 million.
Within the AZT PROTECT business, the company serves more than 46 unique customers, including several with multi-site deployments underway. In managed services, contracts signed during the quarter are expected to generate nearly six figures in additional monthly recurring revenues as implementations are completed, strengthening the company’s recurring revenue base.
Management Commentary
Chief executive officer Victor Dellovo described the quarter as an encouraging start to fiscal 2026, emphasizing the strategic focus on expanding higher-margin services revenues and growing monthly recurring revenues. He noted that while year-over-year product comparisons were pressured by the prior year’s large one-time transactions, the underlying performance of the services segment drove meaningful gross margin expansion.
The company highlighted continued traction for AZT PROTECT, including site wins and additional deployments at second and third sites among existing customers. Dellovo acknowledged that procurement cycles can be lengthy and vary by customer, but pointed to growing reference accounts and industry-specific case studies as improving the sales process. The company is also working to embed AZT PROTECT into Acronis’ platform, describing the opportunity as scalable but still in the integration phase.
Factors Influencing the Quarter
The headline revenue decline stemmed primarily from tough comparisons with first-quarter fiscal 2025, when $4.5 million in one-time product deals were recognized. Management reiterated that the timing of large product orders can fluctuate significantly from quarter to quarter, affecting short-term revenue trends.
At the same time, a higher proportion of service revenues, which carries materially stronger margins than product sales, drove a more than 10-percentage-point increase in the gross margin. This improved mix helped offset lower revenues and narrowed the operating loss.
Income tax expenses totaled $280,000, reflecting an effective tax rate of 75.5%, compared with a tax benefit in the prior-year period. The elevated rate was attributed to state income taxes, changes in valuation allowances against certain state credits and non-deductible executive compensation.
View
The company expressed confidence that fiscal 2026 is shaping up to be a growth year. Leadership expects service segment momentum to continue, supported by investments in managed services and expanding AZT PROTECT deployments. Management also anticipates generating operating leverage as revenue scales, citing infrastructure investments already in place to support growth.
CSP’s board declared a quarterly dividend of 3 cents per share, payable March 12, 2026, to shareholders of record as of Feb. 26, 2026.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.
View the Zacks #1 Rank List
Image: Bigstock
CSP Q1 Earnings & Revenues Fall Y/Y, Margins Rise on Service Growth
Shares of CSP Inc. (CSPI - Free Report) have declined 1.8% since reporting results for the first quarter of fiscal 2026. This compares with the S&P 500 index’s 1.5% slip over the same time frame. Over the past month, the stock has lost 15% compared with the S&P 500’s 1.9% fall.
CSP reported revenues of $12 million for the fiscal first quarter ended Dec. 31, 2025, down from $15.7 million in the year-ago period. The decline was primarily caused by the absence of several large, one-time product transactions that contributed more than $4.5 million in the prior-year quarter. Product revenues fell to $6.7 million from $11 million, while services revenues rose 14.6% year over year to $5.3 million from $4.7 million.
Despite lower total revenues, gross profit increased to $4.7 million from $4.6 million, and the gross margin expanded sharply to 39.3% from 29.1%, reflecting a richer mix of higher margin services revenues. Net income declined to $91,000, or 1 cent per diluted share, from $472,000, or 5 cents per diluted share, a year earlier.
CSP Inc. Price, Consensus and EPS Surprise
CSP Inc. price-consensus-eps-surprise-chart | CSP Inc. Quote
Other Key Business Metrics
The operating loss narrowed to $112,000 from $354,000 in the prior-year quarter, reflecting improved gross profitability and relatively stable operating expenses. Engineering and development expenses increased to $858,000 from $786,000 as CSP continued to invest in customization and OEM-embedded initiatives for its AZT PROTECT cybersecurity solution. Selling, general and administrative expenses declined modestly to $4 million from $4.1 million.
On the balance sheet, CSP ended the fiscal first quarter with $24.9 million in cash and cash equivalents compared with $27.4 million at Sept. 30, 2025. Management indicated that the decrease was largely related to financing deals closed in the quarter, with $3.3 million in financing payments expected over the next two quarters. Current liabilities declined to $17.9 million from $22.2 million at the end of the fiscal year, while shareholders’ equity increased slightly to $44.8 million.
Within the AZT PROTECT business, the company serves more than 46 unique customers, including several with multi-site deployments underway. In managed services, contracts signed during the quarter are expected to generate nearly six figures in additional monthly recurring revenues as implementations are completed, strengthening the company’s recurring revenue base.
Management Commentary
Chief executive officer Victor Dellovo described the quarter as an encouraging start to fiscal 2026, emphasizing the strategic focus on expanding higher-margin services revenues and growing monthly recurring revenues. He noted that while year-over-year product comparisons were pressured by the prior year’s large one-time transactions, the underlying performance of the services segment drove meaningful gross margin expansion.
The company highlighted continued traction for AZT PROTECT, including site wins and additional deployments at second and third sites among existing customers. Dellovo acknowledged that procurement cycles can be lengthy and vary by customer, but pointed to growing reference accounts and industry-specific case studies as improving the sales process. The company is also working to embed AZT PROTECT into Acronis’ platform, describing the opportunity as scalable but still in the integration phase.
Factors Influencing the Quarter
The headline revenue decline stemmed primarily from tough comparisons with first-quarter fiscal 2025, when $4.5 million in one-time product deals were recognized. Management reiterated that the timing of large product orders can fluctuate significantly from quarter to quarter, affecting short-term revenue trends.
At the same time, a higher proportion of service revenues, which carries materially stronger margins than product sales, drove a more than 10-percentage-point increase in the gross margin. This improved mix helped offset lower revenues and narrowed the operating loss.
Income tax expenses totaled $280,000, reflecting an effective tax rate of 75.5%, compared with a tax benefit in the prior-year period. The elevated rate was attributed to state income taxes, changes in valuation allowances against certain state credits and non-deductible executive compensation.
View
The company expressed confidence that fiscal 2026 is shaping up to be a growth year. Leadership expects service segment momentum to continue, supported by investments in managed services and expanding AZT PROTECT deployments. Management also anticipates generating operating leverage as revenue scales, citing infrastructure investments already in place to support growth.
CSP’s board declared a quarterly dividend of 3 cents per share, payable March 12, 2026, to shareholders of record as of Feb. 26, 2026.